Banks deposit rates under review

Savers could be the next targets for the banks after they refused to pass on the full amount of official interest rate cuts to home-loan borrowers.

A day after the Reserve Bank of Australia lowered the cash rate by 0.25 of a percentage point,
National Australia Bank
,
Commonwealth Bank of Australia
and
Westpac Banking Corp
confirmed they would pass on only part of this to mortgage customers.

But the banks said they were yet to decide whether they would lower the rates they paid to deposit customers by a lesser amount than the RBA cut.

“We haven’t made a decision yet on deposits. We will just need to see. We will balance a number of things before making that decision," NAB group executive of personal banking Lisa Gray said.

On Tuesday, the RBA cut the official cash rate to 3 per cent, the lowest level since the height of the financial crisis in 2009.

NAB, CBA and Westpac lowered their standard variable home-loan rates by 0.20 of a percentage point to 6.38 per cent, 6.4 per cent and 6.51 per cent respectively on Wednesday. The cuts match that made by
Bank of Queensland
on Tuesday. ANZ Banking Group will make its decision on December 14.

While the major banks held out on customers, smaller lender
Yellow Brick Road
said it would pass on the full RBA cut. “We believe our clients deserve it and we want to help them enjoy their holiday season, even if that means that we have to eat some of our margin," YBR executive chairman
Mark Bouris
said.

After moving mortgage rates, NAB, CBA, Westpac and BoQ said their deposits remained under review, raising the prospect that they will slug savers by lowering account rates by the full 0.25 of a percentage point of the RBA’s cut, even though they did not pass this amount on to home-loan borrowers.

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Westpac group executive of retail and business banking Jason Yetton said the high cost of paying customer deposits was a major factor in the decision to hold back some of the RBA’s cuts from borrowers. “Competition to provide these rates to savers has pushed up the cost of those deposits to historically high levels."

Ms Gray also blamed high deposit rates. “We are still continuing to experience uncertainty in wholesale funding costs and our outlook is that there is uncertainty. At the same time, we are continuing to experience competition for deposits," she said.

Official figures out on Wednesday showed the economy grew by a slower than expected 0.5 per cent in the September quarter, and business groups said the banks’ reluctance to pass on rate cuts was taking a toll.

“The lack of positive action by the banks feeds uncertainty in business and slows down helping the weakest parts of the economy," Australian Chamber of Commerce and Industry director of economics Greg Evans said.